Watchdog: New flood rates could effectively evict homeowners

Feb. 11, 2013

Contractors lower the Ortley Beach house of William Rumbolo onto its newly raised foundation, now at 11 feet. / PETER ACKERMAN/STAFF PHOTOGRAPHER

5 THINGS YOU NEED TO KNOW ABOUT FLOOD INSURANCE NOW

1) Could my flood insurance rate hit $31,500?

This represents a possible maximum rate for a home that essentially sits 4 feet below the floodplain in a high-risk zone. FEMA, however, has declined to discuss how they arrived at that dollar amount, what sort of estimate it is and what the rates might be in other flood zones and at other elevations. FEMA and Gov. Chris Christie, who used a similar figure at a recent press conference, are both urging people to “build smart,” by elevating their homes and taking other measures. 2) When do new flood insurance rates take effect?

In about 12 to 18 months. That is when the advisory base flood elevation (ABFE) maps, now published, will likely be finalized into new rate maps, according to FEMA spokesman Chris McKniff. 3) What are the ABFE maps?

These are the new advisory elevations to which a “100-year storm” could raise flood water. A 100-year storm is one that has a 1 in a 100 chance of occurring each year. FEMA released ABFEs months early so people rebuilding from Sandy have an idea of what new building requirements they will be facing. Some people who have already rebuilt will have to elevate their homes to avoid staggeringly high flood insurance premiums. The State of New Jersey adopted the ABFEs to set minimum elevations for new construction and homes that sustained damage of more than 50 percent of their market value. 4) What will my new rate be?

Not even insurance brokers know yet. But the $31,500 figure FEMA has released is an indication that the rates could be astronomical for people whose homes sit low in high-risk zones and do not elevate their homes. 5) How do I find out what the ABFE for my home is?

That’s the supposedly new high-end flood insurance premium for properties most vulnerable to flooding that Gov. Chris Christie mentioned Jan. 24 when he announced the adoption of new flood maps by New Jersey.

The Federal Emergency Management Agency has included a figure slightly above that in a brochure on why it’s wise to “build smart” — raising a home well above what the new base flood elevations are expected to be. FEMA’s and Christie’s message: The higher you raise your home above the base elevation to a point, the lower your flood insurance premiums will be.

By the standards of the vast majority of Shore dwellers, it is a fear-inspiring number.

“If that’s the cost, I’ve been effectively evicted from my home,” said Brian McAlindin, 54, of Point Pleasant, an attorney with 30 years’ experience in insurance-related litigation.

McAlindin, his wife and their three school-age children have yet to return to their Sandy-damaged home, recently placed in the highest-risk flood zone under FEMA’s advisory guidelines. Added to that, he fears that the cost of elevating his home, which would help him avoid the high flood insurance premiums, will be “very impractical and extremely expensive” because of the situation of his house.

The issue of flood insurance and home elevation has caused McAlindin much anxiety and lost sleep, he said. He is urging Christie to battle FEMA over what he feels is the unwarranted change in some flood zones.

“In spite of my education, training and background, I am as overwhelmed by this as with anything in my life,” he said.

How accurate is the $31,000 figure?

Regardless of the answer, one thing is certain: the astronomical figure is at least a sign that it’s going to get a lot more expensive to live near the water at the Jersey Shore.

No help

FEMA, which runs the National Flood Insurance Program, has offered little explanation of that high-end figure other than to say it is what a homeowner would pay annually whose house sits 4 feet below new base flood elevation in the highest-risk flood zone — the “V” Zone.

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That means a home could expect to experience “wave velocity” or water crashing against it in a 100-year storm. Other assumptions are included in that scenario, like $250,000 of home coverage — the most.

The base flood elevation is the level which there is a 1 percent chance of a flood rising to or exceeding annually.

But what about homes in other zones at other elevations above and below the base?

FEMA also has declined to respond to repeated requests for that information.

And it also has declined to acknowledge a document on future rates being handed out by some officials to the public. It is not sourced as coming from FEMA.

FEMA in December released its advisory base flood elevations maps months early so people planning to rebuild would have some guidance on costs associated with options like elevating a home or not. Those advisory elevations are expected to become the new elevations on which FEMA bases its flood insurance rate maps. Some elevations may change. The preliminary rate maps ) are expected out in August.

New flood insurance rates are not expected to kick in for a year to 18 months, said Chris McKniff, FEMA spokesman.

Confusion reigns

That question of what the new rates will be has befuddled Chuck McHugh.

Living four blocks from the ocean in Spring Lake, McHugh and his family escaped flooding from Sandy.

And although his house lies close to Wreck Pond, his basement has never been flooded.

But McHugh, 57, has still tried to wrap his mind around the question of how much people in his neighborhood will end up paying for flood insurance premiums.

Hours on the phone with state and FEMA officials and hours spent poring over new legislation has produced this: He fears homes in his neighborhood — moved from a low-risk “X” Zone to a higher-risk “A” Zone — that sit 4 feet below the new base flood elevations could rise to more than $9,500 annually. The figure appears in another FEMA brochure.

One website McHugh visited is www.floodsmart.gov. It allows users to plug in their addresses to find out about their possible flood insurance rates. But the information is based on the old base flood elevations.

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Even if Sandy never landed on shore in New Jersey, flood insurance premiums were due to rise under a new law that aims to remove the federal subsidies for flood insurance.

The new law, the Biggert-Waters Flood Insurance Reform Act of 2012, had flood insurance rates rising at a relatively modest rate over time before the advisory base flood elevations came out. One effect of the new legislation: rates for certain secondary homes in high-risk areas will increase 25 percent per year over the next four years starting this year.

“Biggert-Waters was passed at the same time when FEMA is aggressively updating flood risk,” McHugh said. “It’s a perfect storm for many unaware.”

Jeff Gamble of the Ocean County real estate and insurance firm, the Van Dyk Group, said the issue of flood insurance premiums has suddenly become a major factor for people looking for homes.

“It’s something that every prospective buyer is asking about,” said Gamble, real estate manger at Van Dyk. “It might be the deciding factor.”

The difference in awareness is dramatic, he said.

“Before, few people ever asked about flood insurance — we had to bring it up to them. It was really no big deal,” Gamble said. “Now, they all ask about it. The big thing is that no one locally has ever had to deal with this.”

The new advisory base flood elevation maps can place some homeowners in a financially dire situation. “If I have a home that is 6 feet below the ABFEs and someone wants to list it, we’re going to have to sell the land minus what it would cost to tear down or elevate,” Gamble said.

Banks require mortgaged homes to have flood insurance for all zones except the lowest risk X Zone, said John McWeeney of the New Jersey Bankers Association. As FEMA points out, everyone lives in a flood zone.

So even if people own homes outright, are not required to elevate their homes and decide against buying flood insurance, the question of high flood insurance premiums will rear its head for potential buyers.

Insurance brokers are just as uncertain about future premiums as the public, Gamble said.

“We can’t tell them what their rates are going to be, because nobody knows,” he said.